3 Unique Ways to Chip Away at Debt

Some student loans can be lessened by volunteer work

If you're one of the tens of millions of Americans carrying credit card debt, you may be seeking specific and realistic strategies to get rid of your bills.

While taking on a part-time job to generate more income can help, not everyone over 50 is working — or can easily get a job. Also, cutting down on extra expenses to free up cash can help you pay off and eliminate debt, but what can you do when you've already cut expenses to the bone?

Fortunately, there are also some other effective ways to get out of debt and get ahead financially. Here are three unique ways you might not have thought of for eliminating debt:

1. Volunteer Work

A surprising number of people over 50 are still paying off their student loans from undergraduate and graduate school. Also, many in the 50-plus club co-signed for their children's student loans, which puts them on the hook for those debts.

If student loans account for a good amount of your debt load, you don't have to settle for just paying that minimum amount month after month. Student loan forgiveness programs can eliminate thousands of dollars in student loan debt but only a relatively few people take advantage of this opportunity. These programs are backed by the federal government and can be applied to both Stafford and Perkins loans.

If you're retired or are able and willing to volunteer with groups like the AmeriCorps VISTA (Volunteers In Service to America) or Peace Corps programs, the government can literally erase your college debt as a benefit for volunteering your time. Obviously, there are both pros and cons of pursuing this strategy but this is a debt payoff option worth considering.

In addition to federal programs, SponsorChange.org is one private program that will help pay off part of your student loans in exchange for your volunteer service. The financial aid website FinAid.org contains great information and further tips about volunteering as a debt-reduction strategy.

FinAid's site explores a range of loan forgiveness options, including volunteering, teaching and public service. It's worth noting that no volunteer programs that pay off your college debt require any money from you; but they do require your commitment of time, sometimes for a year or more.

2. Peer-to-Peer Loans

If you've been struggling to pay off those high balances on credit cards, consider the benefits of a peer-to-peer loan. These loans can be used to consolidate high rate credit card debt. They work similar to a personal loan you would get from a bank or credit union.

The key difference between peer-to-peer loans and traditional bank loans is that you'll be borrowing from multiple individuals who have agreed to lend money through a social lending network, such as Prosper.com or LendingClub.com. The lenders' incentive for participating in this type of program is that they earn a higher interest rate on the loan than they could earn from funds sitting in a money market account or CD.

Peer-to-peer loans offer borrowers cheaper borrowing costs; a speedy application and funding process and a faster debt payoff cycle. Peer-to-peer loans must be repaid in intervals of one to five years, unlike credit card debt, which can linger endlessly. Also, peer-to-peer loans are better for your credit score than credit card debt because peer-to-peer loans are categorized by the credit bureaus as "installment" debt, not "revolving" debt like credit cards.

3. Life Insurance

If you've been putting money in a whole life insurance policy over the years, you may be eligible to withdraw or borrow money against the cash value of your policy. Those funds could then be used to pay off credit card debt and loans. Talk to your insurance agent about the actual cash value of your policy.

You'll want to find out what how much you could potentially withdraw or borrow; what amount (if any) you'd have to repay with a life insurance loan; and the extent to which a withdrawal or loan would reduce the life insurance proceeds your heirs receive in the event of your death.

If you've had your whole life policy for many years, it's possible that the policy has accumulated a large cash benefit that may be nearly equal to the death benefit your heirs will receive when you pass away. For those that have a large cash value, you may be able to borrow against that — or even convert it into a higher death benefit — without reducing the money you leave behind for your loved ones.

To know for sure, ask your insurance agent about the impact of borrowing or tapping into your life insurance funds. And do read the fine print of your policy too.

If you have to borrow from or cash out a whole life policy to pay off debt, you may also be able to replace that whole life insurance with a cheaper term policy.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.